Tax question relocating to multiple states

[shangxinwulei]

Hi,

My employer A is based in Washington state which has no state tax and I worked for employer A during 01/2022-08/2022. I was working remotely from VA for employer A during 01/2022-03/2022 which I guess I would be paying VA state tax for. I moved back to WA and stayed 03/2022-08/2022. Then I changed job to work for employer B at CA and moved to CA on 08/2022 and worked at CA for employer B throughout 2022. Here comes the questions:

1. For salaries will I be paying VA for January to March since I worked remotely at VA? Or because majority of my time were spent at WA it would be paying to WA due to less than 6months worked at VA?

2. I received some stocks on Feb when I was at VA, do I need to report those income under VA as well instead of WA?

3. I received some bonus on 09/2022 from employer A after I quit my position, the bonus was received when I became a resident at CA (08/2022) do I need to pay CA state tax on those bonus or not since I got it through employer at WA for my service performed at WA?

[Anonymous_]

@Mike9241 

[TomD8]

@shangxinwulei 

To answer your questions:

1.  Any income you earn from work you performed from a location in VA is taxable by VA, regardless of the employer's location.  (The only exception is if your residence is in a reciprocal state, which WA is not.)

2.  Any stock-related compensation you earned is taxable by VA if the compensation is related to work performed in VA.

3.  Regardless of its source, the bonus you received after becoming a resident of CA is taxable by CA.

[CatinaT1]

Yes. You will need to file a return in Virginia and in California, both part-year residents. You will pay tax on your income earned while in each state.

1. You will pay tax to Virginia for the pay you received while working in Virginia remotely. Washington State does not have an income tax, so you will not file a Washington State Return.
2. It depends. If you received money for stocks in February, while you worked in Virginia, you would pay taxes on that income to Virginia. If this stock was from your employer, you may want to check your W2.
3. Generally, if your bonus is for work performed in Washington, it is not California income for income tax purposes. For further information, refer to this FAQ.

[TomD8]

I disagree with @CatinaT1 's answer #3.

From CA FTB Publication 1031, page 6:

Residents of California are taxed on ALL income, including income from sources outside California.

https://www.ftb.ca.gov/forms/2021/2021-1031-publication.pdf

If the bonus was received after @shangxinwulei became a resident of CA, it is taxable by CA.

[shangxinwulei]

I think the key question I am trying to get answered here is, both the stock reward and the annual bonus are for the performance of the year. If I stayed at VA for the month I got the stock does 100% of the stock tax goes to VA or just the x month/12 percent of the earning? Same question goes to the bonus I received after becoming a CA resident. The bonus was decided before I quit my job and it was sent out afterwards, which date does it matter? is it the date it gets to my bank or is it the date it was supposed to be granted?

[TomD8]

The bonus is taxed based on your state of residence on the date on which you had constructive receipt of it.  Here's the legal definition of "constructive receipt":

Constructive receipt of income is a tax term which determines when a cash-basis taxpayer has received income. Constructive receipt of income occurs when a party obtains income that is not yet physically received but has been credited to the taxpayer's account and over which they have immediate control.

https://www.law.cornell.edu/wex/constructive_receipt_of_income#:~:text=Constructive%20receipt%20of%2....

The bonus is taxable by Virginia to the extent that it is compensation for work performed in Virginia.  You would pro-rate accordingly.

[shangxinwulei]

So it sounds like I need to report prorated stock award to VA state tax and all the bonus to CA state tax...

RIP my tax this year. I checked the bonus paycheck was 9/1-9/15 period. I became a CA state resident on 8/31. Do I prorate this part as well?

[TomD8 · Accepted solution]

"I checked the bonus paycheck was 9/1-9/15 period. I became a CA state resident on 8/31. Do I prorate this part as well?"

If the paycheck was received after 8/31, you don't pro-rate with regard to CA tax.

"So it sounds like I need to report prorated stock award to VA state tax and all the bonus to CA state tax..."

Correct.  Note that you may claim a credit on your VA tax return for the tax paid to CA on the portion of the bonus that is taxed by both states.  Therefore that income is not-double-taxed.

[shangxinwulei]

I don't know if it made a difference. I never became a resident of VA while I was remote. I moved to VA to work remotely but my residency remained at WA and I never changed my permanent address if that made a difference

[TomD8]

@shangxinwulei --

Income you earned by physically working within Virginia is taxable by Virginia, regardless of your state of residence.

Since you never became a resident of VA, you would file a non-resident Virginia tax return to report that income.